INTERVIEW: The X(box) Factor

Who better an interview subject for a piece looking at the rise and rise of Xbox than its new UK director of retail sales and marketing Jonathan Grimes?

Like the venerable box itself, which rose in people’s estimations over the brand’s history, Grimes has climbed the ranks of Microsoft. Taking over from Neil Thompson in the summer, he took his new role at the perfect time. Xbox is heading into its tenth Christmas on the global market, propelled by division boss Don Mattrick’s E3 warning to other consoles that it would be the year’s best-selling console.

“I’ve been in the retail team for 15 years, and joined pre-Xbox,” says Grimes. “So I have some fond memories from the last ten years.”

The perfect man, then, to ask about the Xbox story so far, from both a personal and business point of view. So we did. The following isn’t just a fascinating look into what one of the UK trade’s most senior execs thinks, but also a perfect look at the past, present and future of Xbox.

THE PAST

Let’s go back to November 2001. Xbox came out in the US, but there was still a way to go to the UK launch – and a way to go in establishing the console. Did you think that, ten years later, the platform would get this far?

When I joined we were in the PC games market and titles like Flight Sim and Train Sim defined us. We used to be the guys in the corner of the room at the retailer conference.So when we launched into games fully there was a huge level of excitement. We knew we had to work hard. But we all of us had belief this would work.

When you think that we entered the market 10 years ago and are now the No.1 product, there aren’t many industries in terms of entertainment or electronics where someone can claim leadership so quickly.

What were the challenges you faced in carving out Xbox’s space in the market?

The big question was if the market could cope with another platform. That was the question I was regularly asked when selling the product in. But when people could see what we were doing they understood we wanted to take consoles to a new space.

After that we had to make it clear why we were doing more in the box than our competitors – an internet connection from day one, for instance. That was functionality which, without it today, the industry would be in a very different place. And the hard drive; it was a curious thing back then to some, but now storage is a much-required part of any console.

When it comes to the first Xbox there are lots of things that many took exception to, but which became the rule, for consoles.

The traditional console cycle and how we replenish hardware is something we’ve put on its head. In a ten-year period historically you go through a few different consoles to get a new experience. But the new dashboards and online updates have helped us keep reinventing our platform and maintain its relevancy.

We are focused on delivering the right experiences for the consumer. If that can be done with the hardware in the market at the moment, then fine. At some point, those two things will part ways, but currently we are focused on delivering the best experience on consoles in the market at the moment.

Xbox started out as a ‘core gamer’ platform. But over time it was pitched as a family device too, so the message around what it is, is changing. How do you balance the two? Has that helped you slow the anticipation for a new Xbox?

For a core gamer or ultimate gamer, or whatever they call that kind of dedicated player these days, you don’t change the message for them. They still care about the high-end content, and we still talk about that. We don’t stop talking about core content. The content we have had out this year – Gears of War, Halo, Forza – has been a key part of what the core audiences want.

The different between now and Xbox 1 is that those games was the only message. Now it’s just one message amongst many. Xbox has become something that has different relevancy to different people.

THE PRESENT

At E3, Don Mattrick said 360 would end the year as the best-selling console. Are you still on course for that?

We are still extremely pleased with our position in the market. From a UK perspective we’re still on track. The market is in a tough place – it’s a tough retail market overall. We’re pleased at how we are performing – we’re still the No.1 console in the UK and have an exciting time ahead in the run to Christmas.

Is there still more to achieve in terms of growth?

There’s definitely more to achieve. It’s down to looking at the multiple experiences a console will deliver. Things like DVD and TV content, but adding strands like playful learning using Kinect, are growing the device and its potential. The console will move even more into the living room now – if it’s not there already – through the services from the likes of Channel 4, LoveFilm, and so on that we have on board. So what we have to offer fits most of UK consumers – until I have one in every household there is always going to be growth.

Your big competition, Sony, has been aggressive this year, with a price cut putting its device in line with 360. Has it slowed Xbox?

No. We are still on the course, and very happy with our value proposition. Who knows what will happen in the next six weeks in the run up to Christmas, but right now I’m pleased. Retail is in a tough place and the macro-economic situation is difficult, but we are confident.

So no price cut?

We’re happy with the value in the market at the moment – there are no plans. The value – and I mean not just the price of the box but what’s in it – for a family of four, is good. It really puts in their mind: do they go on their second holiday, or buy a console? In terms of consumer expenditure games are still doing well, it’s seen as a good proposition for family entertainment. And more and more, as content is becoming broader, we are getting mums and dads playing games like Dance Central and widening out more and more.

THE FUTURE

Analysts, retailers and publishers predict a flat market in 2012 and no growth for hardware. Does that match Xbox’s projections?

I think the macro-economic picture is what is driving a lot of analysts’ thoughts. My concern at the moment is that you can jump from watching the news at 12 o’clock today and come up with one assumption and at 12 o’clock tomorrow have a different one. At the moment there is nothing that concerns us and will affect our plan over the next 24 to 36 months. I believe if we focus on offering the right thing to our consumers we will do well. My concern is that whenever things are tough economically, there is more rumour and speculation about what may happen than the actual reality of the market and what will happen.

There’s also a lot of speculation by analysts, retailers and publishers about digital sales and what that’s doing to retail.

We’re seeing this across all markets not just video games. If anybody watched retailer share prices over the last few months it doesn’t give you any indication of what lies ahead – we’ve seen enormous daily growth and enormous daily drops. That’s just a sign of uncertainty more than anything else.

What does the new dashboard and its new elements tell us about the short-term future of Xbox 360?

The new dashboard fits into that wow-factor element that came with things like Halo 3 or Kinect. It’s that important for us.

Bing search is a key part of that. When somebody talks to their console and asks it to find content for it and the results come back, that’s a fantastic experience. And it really opens people’s minds to what we are doing in the short-term, and also what the box and the industry can do in the long term.

We’re seeing that people already use the console in their house as the key entertainment box – and we’ll see that more and more. It’s happening a lot in the US, where we’ve had those broader experiences for a while, and have seen that the sessions spent on the console have grown significantly.

What about Kinect? How much further can you go?

The TV ad we have launched really sums it up and shows where we envision it sitting in the home. What is particularly encouraging about Kinect is that we see what other individuals are doing through the new open SDK we released. Of course we are doing a lot of Kinect development ourselves, but the TV ad shows how the world can and has done other things with Kinect. I watch that ad and think: ‘wow – where else can we go?

So Kinect can be part of the experience and will become much more a part of it as time goes on. My son, for instance, walks past a TV and thinks he can wave at it to interact. As the user-interface becomes more common across other platforms and games we’re excited as to what is to come out of it.

Xbox Live hasn’t just been a digital pioneer, but is finding a home through retail outlets too – GAME sells points cards and redemption codes for games. Are there more ways to mix the physical and digital models?

Yes. Working with our partners has been a core philosophy in Microsoft – across the whole business, and fittingly right through the Xbox brand’s life.

So we’re always trying to be ‘the partner’s best partner’. That’s a phrase we use across the company and quite a lot internally, especially on my side. We want to be seen as the best company to work with, so we’re always looking at opportunities, and at how we can develop – the ecosystem for us has always been about how we share that with others and not to keep it all to ourselves.

THE LEGACY

Perhaps the biggest achievement for Xbox, however, isn’t that it carved a space for itself in a crowded market, and maintained an edge as the competition reacted – but that it has become a de facto part of the games industry fabric. The brand has been part of a cultural attitude change towards games.

Concludes Grimes: “The great thing for me is that, purely by coincidence, it has followed my lifestyle, too. I’ve gone from being a core gamer myself through to having a family and sons who are becoming core gamers themselves.

“And for us the awareness around Xbox is beyond gaming now. It still gives us a great feeling when you hear Xbox referred to – whether in songs or on TV – as the general term for games. That’s the point where you look back at when we started out and we’re asking ourselves if we’ll get there or not, and realise it’s been a hugely successful ten years for us.

“It’s one of those feelings where you get a tingle on the back of the neck, and can proudly say ‘I helped drive that’. My six year old says ‘That’s you, Dad.’ You can’t beat that feeling.”

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